Hopes of Americas sale rise as Thyssen takes writedown

FRANKFURT Wed May 15, 2013 4:28am EDT

A sign belonging to Europe's largest steel factory of Germany's industrial conglomerate ThyssenKrupp AG is seen in the western German city of Duisburg in this December 6, 2012 file photograph. REUTERS/Ina Fassbender/Files

A sign belonging to Europe's largest steel factory of Germany's industrial conglomerate ThyssenKrupp AG is seen in the western German city of Duisburg in this December 6, 2012 file photograph.

Credit: Reuters/Ina Fassbender/Files

Related Topics

FRANKFURT (Reuters) - German steelmaker ThyssenKrupp (TKAG.DE) took another writedown on the value its Steel Americas business, driving it to an unexpected quarterly loss but raising hopes it is closer to selling the troubled asset.

The firm said on Wednesday it was cutting the book value of Steel Americas, which comprises a mill in Brazil and another in the United States, to 3.4 billion euros ($4.4 billion) from 3.9 billion, which analysts said showed it was ready to accept a lower price and could be nearing a long-anticipated deal.

"The precise figure of 683 million euros (for the writedown) indicates that the deal is imminent," analyst Heino Ruland of Ruland Research said.

At 0820 GMT (4.20 a.m. EDT), ThyssenKrupp shares were up 4 percent at 15.715 euros, among the biggest rises by a European blue-chip stock .FTEU3.

Steel Americas has been a thorn in ThyssenKrupp's side for years, as the project cost more than expected to set up and then racked up losses as steel prices and demand were weakened by a faltering global economy.

Sources familiar with the matter have told Reuters that ThyssenKrupp was in talks with Brazilian steelmaker CSN (CSNA3.SA), as well as a consortium of ArcelorMittal (ISPA.AS), the world's biggest steelmaker, and Japan's Nippon Steel (5401.T) over a potential sale of Steel Americas.

Both sets of bidders have offered more than $3 billion, but less than the book value at the time. U.S. Steel (X.N) and Nucor (NUE.N) have put in bids just for the U.S. mill, the sources added.

A sale of Steel Americas at even the lowered book value would be a "great result", Davy analyst Tim Cahill said, "given that the market is factoring in 2.0-2.5 billion euros".

UNDER PRESSURE

ThyssenKrupp Chief Executive Heinrich Hiesinger has been trying to offload the mills as he shifts investments to higher-margin products and services, such as elevators, submarines and parts for manufacturing plants.

The writedown pushed ThyssenKrupp to an unexpected net loss of 656 million euros for the fiscal second quarter through the end of March. Analysts had on average expected a profit of 25.5 million euros.

Even excluding Steel Americas and other units up for sale, ThyssenKrupp remained in the red, posting a net loss that narrowed to 89 million from 164 million euros.

The operating margin of its continuing businesses shrank to zero from 3 percent a year earlier on a slump in steel prices, weak demand for car and wind turbine components and provisions it set aside to cover fines and claims related to a rail cartel.

ThyssenKrupp is nearing the end of a push to sell assets with a total of 10 billion euros in annual revenue, and is also cutting costs and changing management structures in an attempt to return the company to growth and pay down debt.

It said on Wednesday that it would cut 3,000 of 15,000 administrative jobs as part of its savings plan.

But CEO Hiesinger still faces an uphill battle as the global economy remains weak and after a series of setbacks and scandals caused him to axe half his management board late last year.

ThyssenKrupp warned on Wednesday it no longer expected sales to remain stable at about 40 billion euros in its fiscal year ending in September, following an 11 percent drop in quarterly revenue from continuing businesses.

It still expects adjusted operating profit from those businesses to decline to about 1 billion euros from 1.4 billion.

ArcelorMittal posted a smaller-than-expected 26 percent drop in first-quarter core earnings last week, cushioned by cost cutting.

($1 = 0.7705 euros)

(Additional reporting by Hakan Ersen; Editing by Harro ten Wolde and Mark Potter)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

A tourist takes a plunge as she swims at Ngapali Beach, a popular tourist site, in the Thandwe township of the Rakhine state, October 6, 2013. Picture taken October 6, 2013. REUTERS/Soe Zeya Tun (MYANMAR - Tags: SOCIETY) - RTR3FOI0

Where do you want to go?

We look at when to take trips, budget considerations and the popularity of multigenerational family travel.   Video